Are Mortgage Requirements Really Cooling Down the Market?
A recent study by BMO has some, namely CTV News in this instance, believing that the new mortgage restrictions that went into place a year ago (today, to be exact!) have cooled the market and kept some from entering the housing market. But the numbers actually need to be put into a bit of perspective before anyone starts to panic.
According to the BMO study, 19 per cent of people decided to wait longer to purchase their first home when the mortgage rules came into effect. But while news sources point to this and start to panic, let’s remember that the number isn’t a huge percentage. It’s actually less than a quarter of home buyers that put off their decision, and no one knows whether those purchases would have been held off anyway. Maybe personal situations changed, maybe financial situations changed. The truth is that with any mortgage or home deal, things can always fall apart and sometimes they do.
And let’s look at the other numbers provided by BMO. The majority of people surveyed, 66 per cent, said that the mortgage restrictions didn’t have any impact on their purchase, nor did they affect their timeline for those purchases. And 14 per cent of people even said that they planned to buy sooner than they had originally.
But even though news sources might believe that these changes had a dramatic effect on the market, others don’t seem to think so. Doug Porter, chief economist at BMO, says that while the rules did have some effect, they had their desired cooling effect, and didn’t put the country into a deep housing freeze.
“It did take a bit of steam out of the market because it essentially forced quite a number of potential buyers, especially first-time buyers, to wait a while longer,” Mr. Porter says.
“I think it was almost the perfect soft landing for policy makers. It cooled, but it didn’t undergo a so-called hard landing. Sales did drop pretty heavily the first couple months, but then they stabilized and they’ve started to creep back up again.”